Friday, January 16, 2004
Insurance costs squeeze town budget
On January 8 the Finance Committee began a series of hearings by department managers in defense of their budgets. The review of budgets for Town Hall, general expenses, pensions and benefits, and the DPW, all presented by Town Administrator Madonna McKenzie, gave an early indication that meeting the FinCom's 1.5% guideline for operating increases will be a challenge. Obvious cuts have been made in past years, leaving little fat to carve out, and increases in uncontrollable costs will continue to squeeze needed services.
Guideline allows 1.5% increase
In mid-December the FinCom set the fiscal year 2005 (FY05) final levy limit budget guideline, raising the preliminary guideline, which had recommended less than a 0.5% increase, to a 1.5% increase for the town's operating budgets. By law the FinCom must recommend a balanced budget, one which includes no override of the Proposition 2-1/2 law limiting real estate tax increases.
In arriving at the final guideline, the committee applied $75,000 of free cash, not yet certified by the state, in order to raise the guideline. According to a letter sent to all departments, "A key factor in this decision was how very tight budgets would have been without applying any free cash." The $75,000 amount was based on an estimate of unspent money from last year's budget. Additional free cash may be realized from back taxes collected from two property owners removing their land from agriculture/forestry protection.
Insurance costs are out of control
Town Administrator Madonna McKenzie presented tiered budget levels for each of her areas: a guideline budget, a level service budget, and in the case of Town Hall, a growth budget. Each line item was calculated based on actual spending in 2003, which in some cases exceeded budgeted amounts.
The most substantial increase was in blanket, group, and unemployment insurance which together will cost the town an additional $117,399 in FY05, an increase of 16% over FY04. This amount was already provided for in the FinCom guideline budget as an uncontrollable expense. Noting that the cost of insurance has almost doubled in four years, from $448,441 in FY01 to $856,724 projected in FY05, FinCom member Bret Bero said, "This is a major out-of-control cost. . .This exceeds overrides we've been passing." According to McKenzie, the town may have little flexibility regarding deductibles and copays as it is part of a group which negotiates rates as a block.
Town Hall running out of cuts
Because most of the Town Hall budget is relatively fixed (heat, electricity, etc.) reductions in recent years have come from deferred maintenance. For example, according to McKenzie, it has been four years since carpets were shampooed, windows cleaned, or gutters cleared. As a result, FY05 maintenance was increased $2,300 to cover these items under the guideline budget of $139K. Also, the "contracts" line was raised $6,000 to correct an error in accounting.
To make up for the increases, other line items for supplies, grounds, telephone, and heat were each reduced from their budgeted amounts for FY04. However, the reductions probably don't reflect true cost savings as these are largely uncontrollable expenses. The level services budget at $145K (a 6% increase over FY04) appeared to be the best estimate of true costs. The growth budget of $151K would allow for needed financial software and a Carlisle web site.
Legal expenses outrun budgets
The general expense category contained a guideline budget of $264,568 and a level services budget of $280,617 (a 7.7% increase over FY04). Upon examination, the second budget appeared more realistic. For example, in order to meet the guideline, $63,250 was set aside for legal services in FY05. However, FY03 expenditures were $81,346 and the town has already spent the $62,250 allocated for FY04 in the first six months. The exceptional FY04 cost is the result of seven lawsuits being pursued against the town by wireless companies. However, each year seems to have an exception; since FY01, the budgeted legal expense has been exceeded every year.
McKenzie believes the wireless suits are winding up and legal costs in FY05 can be kept to $70K, the amount allocated in the level services budget. This budget also includes $6,500 to complete wage and classification adjustments for town employees, a multi-year process begun three years ago. Further adjustments will be necessary to reflect salary changes based on grade. In addition, a reorganization of the finance department at Town Hall has been proposed, and if adopted, could have further cost implications.
Budgets for the Treasurer/Tax Collector's office, with a current guideline of $107,468, were not reviewed in depth as the reorganization may require substantial changes.
DPW requests worker
McKenzie also presented budgets for the DPW with a guideline at $926,389 and level services at $931,539 (a 2.6% increase reflecting gasoline and maintenance needs). The growth budget at $964,792 would allow the department to add an additional worker. Noting that department manager Gary Davis has asked for this each of the past five years, Deb Belanger said an extra worker would provide flexibility in scheduling teams. She wondered if there would be benefits to having a consultant look at the mix of personnel and equipment. "It would be really surprising if it were exactly right." David Trask was of the opinion that, "If Gary needs a person, he should get one. He does a good job." McKenzie reported the Selectmen have decided to look at funding the position next year and added, "For the number of people (employed by the DPW) the amount of work that gets done is huge."
A DPW priority will be repainting street lines, according to McKenzie. It was also noted that Chapter 90 state funds for road maintenance are in danger, and the town may have to assume road maintenance costs in the future.
After reviewing these budgets, the FinCom noted several areas in which extra funding above the guideline may be necessary, including the Town Hall heat and phone, legal, salary adjustments, financial department reorganization, and DPW gasoline and maintenance. As the hearings continue, the committee will keep a list of needed funds beyond the guideline in the hopes that additional money from free cash or higher-than-expected town receipts will become available, and the highest-priority items can be funded.
© 2004 The